Johns Hopkins Hospital seeks $20 million in punitive damages from coal company Lawsuit claims that firm improperly kept royalties

June 19, 1996|By David Folkenflik | David Folkenflik,SUN STAFF

Johns Hopkins Hospital has sued Peabody Coal Co. for $20 million in punitive damages, claiming the St. Louis firm intentionally cheated it out of $650,000 in mining royalties over a decade.

Jane Coil of Madisonville, Ky., earned royalties from leasing her land to Peabody Coal Co. to mine. When she died in 1977, her estate dedicated some of those annual payments to Johns Hopkins Hospital for cancer research. Coil's daughter, Kate, died of cancer at the hospital in 1974.

Hopkins sued the coal company for $650,000 in back payments, saying Peabody had bilked the hospital of the money by improperly subtracting from its income the taxes paid by the company -- and levied on consumers -- on the sale of coal. A federal judge ruled that the hospital is entitled to the money.

On July 15 in Louisville, Ky., a U.S. District Court jury will start hearing arguments in Hopkins' bid for $20 million in punitive damages. The hospital's attorneys contend that the company quietly settled the lawsuits with other royalty holders filing similar claims to try to hide underpayments.

"We believe that the behavior in concealing and miscalculating the payments was pretty egregious and intentional," said G. Daniel Shealer Jr., Hopkins Hospital's deputy general counsel.

The company acknowledges the judge's ruling to pay the additional $650,000, but its lawyers deny that it had any intention of defrauding the hospital. "There was never any attempt to conceal that information," said W. Stanley Walch, an attorney with Thompson Coburn, the St. Louis law firm representing the company.

"To me, it verges on irresponsibility," Walch said of Hopkins' suit for punitive damages. "It doesn't have any direct bearing on the actual damages involved in the suit."

The three taxes levied on the sale of coal include a federal mine-reclamation and black-lung tax, and the Kentucky coal severance tax. Peabody deducted them from the selling price in RTC determining the worth of the royalties.

Judges have ruled in several cases involving Peabody that, because the taxes were passed along to coal buyers, they must be considered part of the selling price. The company has lost a string of challenges to its practices, including to Beaver Dam Coal Co. and the Navajo and Hopi Indian tribes, according to court documents cited by the Associated Press.

In two recent cases in Indiana, judges have ruled against punitive damages, despite finding that the company incorrectly calculated royalties, Walch said.

Those cases are under appeal. The plaintiffs are asking for added damages, and the company's attorneys have called for the basic finding to be overturned.

Peabody Coal Co. is a subsidiary of Hanson PLC, a British conglomerate.

Pub Date: 6/19/96

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